ALC

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5.8¢ alcidion group limited

Ann: Appendix 4C - quarterly, page-98

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Jcw007

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29/01/20

17:33

Post #: 42627484
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Originally posted by composer: ↑

Apologies for the confusion - a big mistake on my part.

I have requested for my previous post to be removed.

Below is the amended post with the right graph.

---------------

Having re-read the announcement and listened to the conference call. I really feel that Alcidion is ahead of my expectations, following the acquisition of MKM Health and etc.

Investment thesis

The thesis here for Alcidion is very simple:

Alcidion is emerging as a disruptive leader in an emerging platform and data analytics market with strong structural tailwinds, disrupting a $1.63 billion market (across Aust, NZ and UK), where network effects and relationships are at play. This leaves Alcidion well-placed to secure market share as hospitals look to technology to improve delivery of healthcare and transition to digital maturity - creating a long runway for growth.December quarter FY20 - Positive momentumTwo things stood out for me on the revenue front

1. Revenue growth

Total revenue already set to be recognised for the 1H FY20 totaled $15.4 million, already totaling 91% of the FY18 revenue of $16.9 million,with the stronger half yet to come.

This was a pleasing result and reflects a company that is continuing to grow. As previously mentioned, the revenue figures also incorporate contracts win that were not announced to the ASX as they did not meet the materiality threshold. An example of this is the 5-year $160,000 contract win with the Queen Victoria Hospital for Alcidion's Patientrack solution via a competitive tender. This is therefore something for investors to bear in mind in between the time lag between ASX announced contract wins/extensions - many things are still happening in the background.

2. Revenue profile

Alcidion is continuing to transition to a more recurring revenue profile. In my view, recurring revenue will continue to accelerate.

The transition to a more recurring revenue profile is important because it promotes:
greater revenue visibility and predictability
better customer retention (provided they are kept happy and satisfied with service)
higher margins
investor valuation

Over time, there is a huge recurring revenue opportunity for Alcidion from its existing three key markets given all of them have yet to commence their transition to digital maturity. Given time, there is the potential for Alcidion to hit the $15-$20 million recurring revenue profile from the first phase of the digital transition from the existing three key markets.

Successful execution to capitalise on the opportunity won't happen overnightBUT the massive market opportunity is right in front of Alcidion to position itself as a disruptive leader in healthcare technology space.

What could go wrong?

Shit sometimes happen but there are definitely some risks associated with the potential reward - aka Alcidion's risk-reward proposition.

The risks that come to my mind include:
new competitors
technological advancement (potentially due to lack of investment in R&D)
cash burn without a corresponding acceleration in sales (declining return on investment)
bad acquisitions (empire building as opposed well-considered acquisition that would deliver an appropriate return on equity)
slower rate of growth that cannot be appropriately explained by seasonality or other valid reason
investors' impatience (both retail and institutional). Growth won't happen overnight and in a straight line, but management has to be given every reasonable opportunity to deliver before investors consider bailing out
poor customer retention
potential unorderly sell down by any top20 shareholders (if their personal circumstances change)

These are all risks that we should be alive to, continuously monitor and, if necessary, hold management accountable for.

Expand

Thanks mate! @willchang409 you’re on fire today!

Cheers
ALC Price at posting: 21.0¢ Sentiment: Buy Disclosure: Held
7 Upvote

0 Great analysis

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